TOKYO – Japan’s manufacturing activity expanded at its slowest pace in three months in May, due to supply shortages due to equipment shortages and a slowdown in output growth and new orders due to China’s COVID-19 lockdown.
Activities in the services sector improved for the second month in a row due to strong domestic demand due to the fading effects of the epidemic, although service-sector companies faced a pull due to sharp rise in input prices on record.
The AU Jibun Bank Flash Japan Manufacturing Purchasing Managers’ Index (PMI) fell to a seasonally adjustable 53.2 in May from the final 53.5 in April. The 50-mark separates the contraction from the expansion.
Both output and overall new orders have expanded at their lowest rates in three months, as uncertainty over price and supply development outlook has been prolonged.
New foreign orders have shrunk sharply since July 2020 on signs of cooling demand from China, Asia’s top economy and Japan’s largest trading partner.
Manufacturers’ input prices rose at an increasingly rapid rate in the 24th month, while delivery times were extended at the highest level since April 2011.
“Private sector firms have reported that the diminished impact of COVID-19 has led to increased service activity, particularly in the tourism sector,” said Usamah Bhatti, an economist at S&P Global Market Intelligence, which compiled the survey.
It said the supply chain had been disrupted by the renewed introduction of lockdown measures across China during the Ukraine war and the imposition of economic sanctions on Russia, with extensive reports of material shortages and severe delivery delays.
The AU Jibun Bank Flash Services PMI index rose to a seasonally adjusted 51.7 in May from the previous month’s 50.7 final, pushing the composite index despite a slowdown in manufacturing activity.
Au Jibun Bank Flash Japan Composite PMI, which is calculated using both manufacturing and services, rose to 51.4 from the final of 51.1 in April.
(Reporting by Daniel Lewisink; Editing by Sam Holmes)